3 Smart Reasons to Max Out Your IRA

Make the most of your retirement savings for the 2017 tax season

It certainly makes sense. With company pensions going the way of rotary phones
and fax machines, Americans are now largely responsible for their own retirement savings.

One of the most common ways to save is through a tax-advantaged savings account
such as an IRA.

In fact, more than 1/3 of all U.S. households have one.1

And it's not hard to see why millions of Americans have them – consistently
funding an IRA can be one of the most effective ways to boost your retirement income.

But while contributing any amount is valuable, funding your IRA to the maximum
can also provide you with benefits you may not be aware of.

What fully funding your IRA can do for you

When you make the maximum contribution, it means you put as much in as allowable
before the year's tax filing deadline arrives.

For tax year 2017, you have until April 17, 2018.

Maxing out your IRA can come with tangible benefits. Here are three to consider.

1. Tax advantages.

Funding your IRA to the maximum is a wise way to take
advantage of tax-deferred opportunities to get closer to your retirement goals.

If you meet the requirements to deduct your IRA contribution,
you could potentially lower your adjusted gross income by the amount you contribute.

Translation: More
money available for your near-term goals with a traditional IRA.

One thing to note – this only applies to traditional
IRAs, not Roth IRAs.

If you can deduct your traditional IRA contribution,
you will pay taxes on the money you withdraw in retirement.

Roth IRAs operate in reverse – meaning you make
contributions with dollars you've already paid taxes on. When you're ready to
use the funds for retirement, if you meet the requirements, you don't have to pay
taxes on your earnings.

In some cases, a Roth IRA may be a better option for
you. It comes down to your overall funding objectives and personal situation.

If you put $100 in your IRA monthly, and do so consistently
for 20 years, you'll have contributed a total of $24,000 of your own money.

Assuming a 6% annual growth rate, your investments could be worth $46,435 in 20
years.

Option B:

Instead of $100, what if you contributed $458 each
month to meet this year's $5,500 limit?

If you consistently did this for
20 years – and again assuming a 6% annual growth rate – your total savings
could reach $212,673.

That's a $166,238 difference.

Translation: The more you put in,
the more your contribution has the potential to grow at an increasing rate. And the
more money you have in the end.

3. Higher limits with age.

Turning 50 comes with perks if you have an IRA. Why?
Because once you're 50, federal IRA rules let you contribute beyond the annual limit
– something known as catch-up contributions.

For the 2017 tax
year, the maximum contribution would be $6,500. That's an extra $1,000 per year you
could add. If you take advantage of this higher limit, it could potentially give your
retirement savings a big boost.

Not only could you see significant compound
growth, but you could also benefit from increased tax advantages.

Translation: If you didn't start saving
as soon as you wish you'd had, you have the chance to make a comeback.

Now what?

Despite these compounding advantages and tax benefits, you may still have reservations
about fully funding your IRA. You feel like you should, but you don't know if you
can.

It's normal to feel that way. That's where a conversation with a financial representative
can help.

Connect with a Thrivent Financial representative before the April 17 tax filing
deadline to work through your questions about increasing your IRA contribution amounts.

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